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Review By Dilip Davda on September 12, 2017
Sagar Diamonds Ltd (SDL) is a engaged in manufacturing and exporting of rough and polished diamonds procured from the trusted and certified suppliers and in jewelry making. The company is also involved in trading of diamond and processing by trained and qualified workers on job work basis. It's product range includes rings, chain, mangalsutra, earrings and necklaces, which are carefully handcrafted by skilled artisans. SDL has its manufacturing facility located in Sachin (S.E.Z), Gujarat having a total area of approximately 1,000 sq. ft. As on March 31, 2017, this facility had a capacity of Gold and Silver Jewellery of 35,000 gram per month. This facility for manufacturing of Diamonds Jewellery have been recognized for its quality Management System with ISO 9001:2015 vide certificate issued on July 13, 2017.
To part finance its working capital and general corpus fund needs, SDL is coming out with a maiden IPO via book building route for listing on BSE SME. The company is issuing 3381000 equity share of Rs. 10 each in a price band of Rs. 40 – Rs. 45 to mobilize Rs. 13.52 cr. to Rs. 15.21 cr. (based on lower and upper price bands). Issue opens for subscription on 14.09.17 and will close on 18.09.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Issus is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par and a bonus in the ratio of 33 shares for every 1 share held in April 2017 and thereafter, raised/converted further equity at a price of Rs. 50 per share
The issue will constitute 26.74% of the post issue paid up equity share capital of the company. Post issue, its current paid up equity capital of Rs. 9.26 crore will stand enhanced to Rs. 12.64 crore.
On performance front, SDL has posted turnover/net profits of Rs.9.99 cr. / Rs. 0.35 cr. (FY17). For the period ended on 20.06.17 it has posted net profit of Rs. 0.30 crore on a turnover of Rs. 10.45 crore that is surprising. As on the said date, its trade receivables were Rs. 20.21 crore. Considering its track record which is just for around 15 months with more than annual turnover in first uncompleted quarter, it is not feasible to annualize the latest performance. However, even if we annualize and attribute to the fully diluted equity post issue, then asking price is at a P/E of around 42 plus (based on upper price band). Last two financial periods it has shown average RoNW of 22.93% that is surprising. Thanks to further equity issue at Rs. 50 per share that has helped it to have NAV of Rs. 23.30 as on 20.06.17 and on the basis of it the issue is priced at a P/BV of 1.93. Peers are trading around 18 P/E. Thus issue is aggressively priced.
On merchant banker's front, this is the 6th mandate from its stable in last three years. Out of last 4 listings two opened at discount, 1 at par and 1 at 4% premium to offer price on the day of listing. (Last IPO of A & M Febcon, which is yet to be listed – as on 12.09.17.)
Conclusion: Considering aggressive pricing, there is no harm in giving this issue a miss.
Review By Dilip Davda on September 12, 2017
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Sagar Diamonds Ltd offers an early investment opportunity in Sagar Diamonds Ltd. A stock market investor can buy Sagar Diamonds IPO shares by applying in IPO before Sagar Diamonds Ltd shares get listed at the stock exchanges. An investor could invest in Sagar Diamonds IPO for short term listing gain or a long term.
Read the Sagar Diamonds IPO recommendations by the leading analyst and leading stock brokers.
Sagar Diamonds IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sagar Diamonds IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Sagar Diamonds IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sagar Diamonds IPO.
The Sagar Diamonds IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sagar Diamonds IPO allotment status to check.
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